European equities have weakened considerably on the Greek debt default question, with the more risky small-cap stocks taking the brunt of the hit. However, if the Eurozone shows any hint of recovery, Europe small-cap stocks and the exchange traded funds that follow the asset class may be an aggressive strategy to consider.
Mid- and small-cap stocks typically show more sensitivity to economic trends, compared to their large-cap counterparts, according to Zacks Investment Research. Consequently, small caps may be discounted during a positive uptrend and experience higher returns than the larger stocks. [Greece ETF Hits New Low on Euro Worries]
Nevertheless, small caps are not for the weak of heart as they are highly illiquid and more risky. Instead of picking through individual stocks, investors may utilize an ETF approach to take on a broad, diversified exposure to European small-cap equities.
The iShares MSCI United Kingdom Small Cap (NYSEArca: EWUS) follows the MSCI United Kingdom Small Cap Index, which is comprised of small-cap companies that represent the bottom 14% of the U.K. equity market. The fund has 269 holdings and the components are evenly spread out. EWUS has an expense ratio of 0.59%.